In the short run, the formal or informal contracts between firms mean that changes in demand will be reflected primarily in changes in _______ .
A) future equilibrium price.
B) prices.
C) output.
D) future price.

Question

Quizplus · Accepted Answer

In the short run, firms are constrained by their existing contracts and cannot easily adjust their prices. Therefore, changes in demand will typically be reflected in changes in output. Firms may also adjust prices in the long run once their contracts have expired, but in the short run, output is the primary variable that can be adjusted.

In the Short Run, the Formal or Informal Contracts Between